The House of Representatives has voted to repeal the Consumer Financial Protection Bureau’s ban on mandatory arbitration agreements. The Republican-led effort now moves onto Senate deliberations.

Mandatory arbitration clauses typically state that either the company or the consumer can require that disputes between them be resolved by privately appointed arbitrators, except for individual cases brought in small claims court.

The Dodd-Frank Act required the CFPB to study the use of mandatory arbitration clauses in consumer financial markets. Congress also authorized the Bureau to issue regulations based on findings that are consistent with the Bureau’s study of arbitration.

The CFPB’s subsequent rule, finalized earlier this month, restores consumers’ right to file or join group lawsuits. Companies can still include arbitration clauses in their contracts, but may not use arbitration clauses to stop consumers from being part of a group action. The rule includes specific language that companies will need to use if they include an arbitration clause in a new contract.

The new rule applies to the major markets for consumer financial products and services overseen by the Bureau, including those that lend money, store money, and move or exchange money.

On July 20, Republicans on the House Financial Services Committee introduced a resolution of disapproval to nullify the “controversial rule,” arguing that it “benefits class action trial attorneys at the expense of consumers.”

H.J. Res 111, sponsored by Rep. Keith Rothfus (R-Pa.), uses Congressional Review Act authority to repeal the rule and prevent the Bureau from issuing any similar rule relating to arbitration.

“As a matter of principle, policy, and process, this anti-consumer rule should be thoroughly rejected by Congress,” said House Financial Services Committee Chairman Jeb Hensarling (R-Texas). “In the last election, the American people voted to drain the D.C. swamp of capricious, unaccountable bureaucrats who wish to control their lives. I can think of no better example of such bureaucrats than those at the CFPB.”

“The CFPB’s anti-arbitration rule hurts consumers and it’s another example of the problems caused by this rogue and unaccountable agency,” Rothfus said in a statement. “We know that consumers get better results through arbitration than through class action lawsuits. Despite the fact that the agency acknowledged this fact in one of its own reports, the bureaucrats at the CFPB have decided they know better.”

The proposal passed in the House with a 231-190 vote.

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